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6/20/2015 Investment House Report
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Targets hit: None issued. Took some great gain on the week, Friday let positions work.
Buy alerts: None issued
Trailing stops: AAOI
Stop alerts: AAOI; CTRP; SFUN
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- Post-FOMC euphoria half life flashes by, but perhaps just a test.
- Stock indexes testing the new highs. Now will they hold and bounce or just roll over as in April and May?
- Leaders continue to work quite well even as market gives back some gain.
- Earnings could be the fly in the ointment, the monkey in the wrench, for this latest move.
- Looking for more of a test then we see if some buys are set up.
This weekend is my birthday so the summary will be shorter. The idea discussed Thursday is a test post-FOMC that leads to some better entries the coming week. Some semiconductors could present new buys along with more drugs/biotechs/healthcare. We have several we are looking at currently on the report, and we add some more this weekend, as well as some telecom, a chip, and other great patterns.
Friday some of the post-FOMC/Yellen the Greatest euphoria wore off. Stocks started modestly higher but could not hold the move, fading across the board. All fades were not equal, however, as RUTX was flat while SP400 and SOX were relative strength leaders. Growth continued to perform better.
SP500 -11.25, -0.53%
NASDAQ -15.95, -0.31%
DJ30 -99.89, -0.55%
VOLUME: Surged on an S&P rebalance. NYSE +122%, NASDAQ +25%
A/D: NYSE -1.4:1, NASDAQ -1.2:1
We said the market might give some better entry points early next week, and it looks as if that might be the case given the Friday fade. That is okay; there are a lot of good stocks that rallied hard, some that broke higher we missed, and others that just started upside but we could still use a test as a better entry. With the Friday follow up action to the post-FOMC rally, those might come around next week and give us some good entries just as we are looking for.
Thus Friday we stuck to the plan and did not enter any new positions. Not that we would have shunned a good move, we just didn't see moves that we just had to get in, moves that would not be there next week with a bit of a test.
After the FOMC meeting Thursday, it was somewhat poetic there was no scheduled economic data Friday. It was, appropriately, a very quiet news day.
There was of course news, it just was nothing too new.
No change in Greece. Lots of posturing, lots of talk, lots of rumors. Bottom line: no deal. It would be our guess that the US market is getting pretty comfortable with the idea Greece may not be bailed out, at least not by the EU/ECB/IMF. It might be Russia, China, or a combination thereof.
And of course the great IMF further undermined a deal by promising to continue funding the Ukraine even if it missed its repayment. So, the IMF is siding with Ukraine because it is against Russia, at the same time pissing off the Greeks and pushing them to side with Russia. Is that what the IMF and EU really want to accomplish? They are very close to doing just that.
RUTX: After the new high posted Thursday, RUTX faded, but just 0.01 points. RUTX continues to demonstrate it is the leader, but the question is whether it holds the breakout. This is the EXACT action it showed in April when it broke to a new high, showed a tight doji the next session, then gapped downside. Hard. So, yes it looked quite good Friday, but recent history suggests that is not necessarily proof of anything.
SP400: The midcaps gave up some ground and the break to a new high, but not a collapse. Still a good pattern, but as with RUTX, the last time the midcaps put in a new high in May, they showed the same action, looked great, then four sessions later gapped downside.
COMPQX: Faded some of the Thursday break to a new all-time high, but still holding over the May prior peak. A solid move on the week, starting with that test lower Monday and intraday reversal. As with the RUTX and SP400, the trick for NASDAQ is to avoid the kind of selloff it put in after the new high in April. That was a fast and hard drop we would like to see it avoid. A pullback/test if fine; a flop is not.
SOX: Faded also on Friday but tapped the 10 and 20 day EMA and rebounded to cut the losses. SOX is attempting to recover leadership status, coming off a short double bottom at the 50 day SMA. Similar action to end April/start May with a short double bottom that jumped the index higher and started the move toward the June peak.
SP500: Faded the Thursday move, still holding over the 50 day EMA. Mid-range, coming off the double bottom, and now we see if SP500 can make the test and hold it to a new bounce.
DJ30: Mid-range as well, holding just over the 50 day EMA as it fades the three day bounce through the 50 day. Not leading, just following. Of course it needs something to follow, meaning the other indices need to hold and then rebound.
So with the recent history of new highs on the indexes, you can see why we wanted to wait for this week to see if the moves test a bit more, this time hold, then make new breaks higher.
Software: Extended, but continues its leadership role. VDSI put in a new high Friday. FEYE holds its gains along with CYBR, posting a modest test. SPLK rallied on the week.
Chips: Started breaking upside again in some cases last week. NXPI looks good to move. SWKS started upside. AVGO continues building a good pattern. QRVO rallied nicely to the prior peak.
Biotech/Drugs/Healthcare: Continued strength with some good patterns building for the next moves. XON posted a great week. TTPH put in a great recovery. HZNP, GLMD, ZIOP put in good moves. Others look solid, e.g. BRLI, AMRN, DYAX, KITE.
Stats: -15.95 points (-0.31%) to close at 5117
Volume: 2.287B (+24.9%)
Up Volume: 917.25M (-542.75M)
Down Volume: 1.48B (+1.086B)
A/D and Hi/Lo: Decliners led 1.22 to 1
Previous Session: Advancers led 2.34 to 1
New Highs: 154 (-18)
New Lows: 37 (0)
Stats: -11.25 points (-0.53%) to close at 2109.99
NYSE Volume: 1.9B (+122.87%)
A/D and Hi/Lo: Decliners led 1.43 to 1
Previous Session: Advancers led 2.02 to 1
New Highs: 100 (-11)
New Lows: 56 (+16)
Stats: -99.89 points (-0.55%) to close at 18015.95
VIX: 13.96; +0.77
VXN: 14.61; +0.73
VXO: 14.29; +0.93
Put/Call Ratio (CBOE): 0.93; +0.04
Bulls and Bears: Bulls fall back down to 48%ish, keeping the weekly back and forth tennis match between 48 and 51 going. Bears actually break higher over 16% for the first time in what has to be ages.
Bulls: 47.4% versus 51.5% versus 48.5% versus 50.6% versus 47.5%
Still bouncing back and forth in a range that is centering around 50.
Bears: 16.5% versus 15.8% versus 14.9% versus 15.8% versus 15.8% versus 13.9%
This week both bulls and bears move in the same direction in terms of both being a bit more negative.
Theory: When everyone is bullish and has put all their capital to work, where does the ammunition to drive the market come from? There is always new money to start a new year. After that is used will more money be coming? That is the question.
51.5% versus 47.5% versus 51.5% versus 48.5% versus 50.5% versus 50.6% versus 47.5% versus 52.5% versus 57.4% versus 52.5% versus 50.5% versus 50.4% versus 54.5% versus 55.6% versus 52.0% versus 53.6% versus 58.7% versus 59.5% versus 56.6% versus 52.5% versus 49.0% versus 53.1% versus 49.0% versus 48.0% versus 50.5% versus 56.4% versus 52.5% versus 49.5% versus 51.5% versus53.4% versus 56.5%
Background: Last undercut 35%, the threshold for bullishness, in early June 2012.
15.8% versus 14.9% versus 15.8% versus 13.9% versus 13.9% versus 15.2% versus 13.9% versus 14.2% versus 14.2% versus 14.1% versus 14.3% versus 14.1% versus 14.1% versus 14.1% versus 14.1% versus 15.2% versus 16.3% versus 16.3% versus 17.4% versus16.3% versus 15.2% versus 14.9% versus 15.8% versus 14.9% versus 14.8% versus 13.9% versus 13.8%
Background: Over 35% for bears is the threshold to be really be a good upside indicator. The best indication is when bears cross up through bulls as the two merge. Right now bulls are coming back down from the 60 level that has consistently marked market tops over the past two years. The rapid decline in progress is pushing the bulls/bears lines toward one another. Still far from a cross with bulls falling faster than bears are rising, but bears are warming up to the notion of market weakness.
Bonds (10 year): 2.26% versus 2.35%. Bonds put in a higher low on the week with the Friday fairly massive upside gap. Rallying off the lows from two weeks back, but a long way to go to even approach the peak from February.
Historical: 2.35% versus 2.32% versus 2.32% versus 2.36% versus 2.39% versus 2.39% versus 2.48% versus 2.433% versus 2.388% versus 2.40% versus 2.31% versus 2.37% versus 2.26% versus 2.18% versus 2.10% versus 2.137% versus 2.133% versus 2.13% versus 2.21% versus 2.19% versus 2.25% versus 2.294% versus 2.22% versus 2.15% versus 2.23% versus 2.28% versus 2.26% versus 2.283% versus 2.14% versus 2.18% versus 2.23% versus 2.17% versus 2.15% versus 2.11% versus 2.04% versus 2.05% versus 1.99% versus 1.92%
Euro/$: 1.1344 versus 1.1372. Modest gain but gave back much of the move on the session. The dollar is still down the past four weeks versus the euro, but perhaps attempting a double bottom spanning May to June.
Historical: 1.1372 versus 1.1339 versus 1.1243 versus 1.1284 versus 1.1254 versus 1.1268 versus 1.1325 versus 1.1277 versus 1.1288 versus 1.1119 versus 1.1241 versus 1.1272 versus 1.1144 versus 1.0922 versus 1.0985 versus 1.0945 versus 1.0904 versus 1.0878 versus 1.1012 versus 1.1111 versus 1.1093 versus 1.1149 versus 1.1314 versus 1.1449 versus 1.1408 versus 1.1311 versus 1.1207 versus 1.1152 versus 1.1207 versus 1.1266 versus 1.1349 versus 1.1189 versus 1.1147 versus 1.1215 versus 1.1220 versus 1.119 versus 1.0982 versus 1.0885 versus 1.0862 versus 1.0824 versus 1.0722
Oil: 59.97, -0.48. Gold continues to work laterally in its 7 week trading range.
Gold: 1201.90, -0.10. Holding the Thursday break higher toward the 200 day SMA. Up and now has to take out the 200 day SMA.
$/JPY: 122.675 versus 122.91. The dollar sold for the third session this week, breaking lower form the lateral consolidation at the 20 day EMA. Nothing like the Fed cheesing up on a rate hike, and more than that, bending over backwards to blunt the notion, has on the currency.
Historical: 122.91 versus 123.415 versus 123.39 versus 123.38 versus 123.41 versus 122.64 versus 124.31 versus 124.44 versus 125.50 versus 124.35 versus 124.26 versus 124.12 versus 124.81 versus 124.10 versus 123.85 versus 124.12 versus 124.15 versus 123.11 versus 121.53 versus 121.09 versus 121.35 versus 120.71 versus 119.99 versus 119.33 versus 119.18 versus 119.11 versus 119.93 versus 120.13 versus 119.75 versus 119.75 versus 119.43 versus 119.85 versus 120.12
Again, our primary plan of action is to let the market test a bit more post-FOMC and see if any new buys set up in the leading areas and emerging sectors. Three indexes broke to new highs the past week and are now testing. They did this in April and May and the results were less than positive. Thus we want to see the test, see it hold, and watch for leaders breaking back upside.
If they cannot hold the breaks to new highs we will be taking positions off the table. Fortunately we have banked quite a bit of gain on the way up in the event the move runs out of gas.
Pretty straightforward plan of action, but of course the market has a way of throwing curves when we prepare for fastballs.
Some of the potential curves are earnings reports. This week saw some of the first earnings trickle in and they were less than encouraging. ORCL whined about the dollar as it missed. KMX missed on the top line. RHT and SWHC beat, but they guided lower. FDX missed top and bottom line. ADBE guided lower. JBL missed top line, guided lower as well. Less than impressive early results.
This could be a problem for the stock market and it might start pricing in that possibility ahead of results. That is something to watch for and we will of course see it in the indexes' ability to hold the breaks higher and leaders holding their gains and patterns. It is summer, stocks typically struggle once midsummer, recover, then struggle in September into October. We have good moves in place but that does not mean they have to hold.
So this week we start watching for a bit more of a fade of last week's move, watching for the leaders to hold near support, and pick up some positions as they break back upside. Some good stocks are already in position, e.g. NXPI, BRLI, MOBI. CRM looks ready to test its break higher and possible present a good entry. There are quality patterns from quality stocks. We will let them set up, and if they show the 'buy me' action, then we act accordingly.
Thanks for letting me be brief today. Birthday, Father's Day, Anniversary this coming week; I try to cram them all in at once. More efficient.
Have a great Father's Day!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 5117.00
5120 is the April 2015 post-bear market high
5132.52 is the 3/2000 all-time high
5207 is the upper channel line
5042 is the March 2015 high
The 50 day EMA at 5029
5008.57 is the early March 2015 post-bear market high
The June low at 4974
4912 the mid-April China dip
The March lows at 4843 and 4825
4815 is the December 2014 prior market peak
4811 is the November 2014 peak (intraday)
The 200 day SMA at 4783
4774 is the January high
4751 is the January 2015 lower high
4631 is the October 2014 upside gap point
4610 is the September 2014 post-bear market high.
4566 is the lower gap point from late October
4563 and 4567 are the January lows
4547 is the December low
S&P 500: Closed at 2109.99
2115 is the late March lower high
2119.59 is the February intraday prior all-time high
2126 was the April prior all-time high
2135 is the May 2015 all-time high
The 50 day EMA at 2101
2094 is the December 2014 high, the prior all-time high
2079 is the intraday all-time high from November
2076 is the all-time high from November
2062 is the January 2015 lower high
The 200 day SMA at 2050
2011 is the September prior all-time high
1991 is the July 2014 high
1972 is the December 2014 low
1905 is the August 2014 low
1902 from early May was the intraday all-time high.
1897 is the prior all-time high hit in April 2014
1883.57 is the early March high.
The December and January highs at 1848
The April 2014 low at 1814
1808 is the November and December 2013 twin peaks
1775.22 is the October prior all-time high
Dow: Closed at 18,105.95
18,206 is the late March lower high
18,289 is the March 2015 high, the prior all-time high
18,351 is the May 2015 all-time high
18,104 is the December high
The 50 day EMA at 17,998
17,991 is the early December interim
17,923 is the January 2015 lower high
17,748 is the mid-April China margin selloff
The June low at 17,715
The 200 day SMA at 17,651
The March low at 17,604
17,351 is the September 2014 all-time high.
17,152 is the mid-July post bear market high
17,068 is the early July 2014 peak
17067 is the December 2014 low
16,970 is the June 2014 former all-time high
16,946 is the June 2014 peak
16,736 is the penultimate all-time high from May 2014
16,632 is the April 2014 all-time high
16,589 is the December 2013 all-time high
16,506 is the March 2014 peak
June 22 - Monday
Existing Home Sales, May (10:00): 5.26M expected, 5.04M prior
June 23 - Tuesday
Durable Orders, May (8:30): -0.5% expected, -1.0% prior (revised from -0.5%)
Durable Goods -ex tr, May (8:30): 0.6% expected, -0.2% prior (revised from 0.5%)
FHFA Housing Price I, April (9:00): 0.3% prior
New Home Sales, May (10:00): 525K expected, 517K prior
June 24 - Wednesday
MBA Mortgage Index, 06/20 (7:00)
GDP - Third Estimate, Q1 (8:30): -0.2% expected, -0.7% prior
GDP Deflator - Third, Q1 (8:30): -0.1% expected, -0.1% prior
Crude Inventories, 06/20 (10:30)
June 25 - Thursday
Initial Claims, 06/20 (8:30): 271K expected, 267K prior
Continuing Claims, 06/13 (8:30): 2210K expected, 2222K prior
Personal Income, May (8:30): 0.5% expected, 0.4% prior
Personal Spending, May (8:30): 0.7% expected, 0.0% prior
PCE Prices - Core, May (8:30): 0.1% expected, 0.1% prior
Natural Gas Inventor, 06/20 (10:30): 89 bcf prior
June 26 - Friday
Michigan Sentiment - Final, June (10:00): 94.8 expected, 94.6 prior
End part 1 of 3
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